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Lululemon Continues to Climb, Thanks to Fashion-Forward Leggings and E-commerce

Despite challenges beyond its control, Lululemon beat expectations on both revenue and profit in its fiscal first quarter.
A Lululemon store in San Francisco. Photo: Justin Sullivan/Getty Images

A Lululemon store in San Francisco. Photo: Justin Sullivan/Getty Images

The weather, currency fluctuations and West Coast port strikes were all working against Lululemon in its first fiscal quarter — but the Vancouver-based activewear company came out of it beautifully, exceeding expectations for revenue and profit and raising its full-year sales forecast.

For the three months ending May 3, net revenue jumped 10 percent year-over-year to $423.5 million, and gross profit increased 5 percent to $205.9 million. (That's a profit margin of 48.6 percent — enough to make Hermès turn green.)

On an earnings call Tuesday morning, Lululemon CEO Laurent Potdevin attributed the strong quarter to more fashion-forward offerings, including leggings printed with florals and inset with mesh panels. (I struggled, and failed, to find such a pair in my size in the first months of the year.) Potdevin also pointed to Lululemon's expanding men's business, the importance of local marketing initiatives (including in-store classes and events) and its push into new markets. In December, the company opened its second store in Asia, in Singapore, and it's already seeing "fantastic results." Plans are now underway to open two stores in Hong Kong and a store in Dubai later this year. As of May 2, there were 316 Lululemon stores in operation.

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Unsurprisingly, e-commerce has become an increasingly important sales channel for Lululemon, up 31 percent for the quarter. The company is planning to launch a full e-commerce redesign prior to the holiday season.

The only blip on the quarter was Lululemon's comparable store sales (that is, sales at stores that have been open for at least a year), which were down 1 percent on a constant dollar basis.

Investors, however, don't seem to be particularly worried: Shares of Lululemon were trading up around 6 percent late Tuesday morning.